The Soviet economy and the approach of war, 1937-1939

By Mark Harrison

It covers 1937 to 1939, the last years of the Soviet economy before World War II. In these years, as the threat of war increased, Soviet society was mobilised against internal and external enemies. Rearmament was pursued with increased determinisation; there were mass arrests and mass killings; while the economy ceased to expand, living standards fell; and there was increasing reliance on forced labour and regimentation of everyday life.

On a more cheerful note, ordinary people continued to live, went to school and to work, made families, made babies (although not at the rate Stalin expected), adjusted to heartbreak and separation, grew old, and died (but the rates at which they died meant they grew no older than in the nineteenth century). They did these things in the setting of a society at war with the world and within itself.

Volume 7 concludes a project begun after World War II by E. H. Carr. His History of Soviet Russia from the Bolshevik Revolution of 1917 to 1929 was published (in 14 volumes by MacMillan) between 1950 and 1969. For his last volumes, Carr recruited R. W. Davies as collaborator. Where Carr left off, Davies continued his own Industrialisation of Soviet Russia from 1929 to 1939, the seven volumes of which (published by Palgrave Macmillan) began to appear in 1980. In the process, Davies acquired collaborators of his own: Stephen Wheatcroft, then Oleg Khlevniuk and, for this final volume, me.

What was it all about? The concluding chapter of Volume 7 reflects on the entire series from the perspective of its endpoint on the eve of World War II. Here are the main themes that we consider.

Forced industrialisation

In the decades before World War I the Russian economy grew at a respectable pace, but industrial growth was slowed by institutional and legal obstacles. Stalin swept these obstacles to one side, forcing the pace of industrialisation. In the 1930s the economy was rapidly industrialised, but there was no increase in its underlying rate of growth. The new command system could redirect resources on a massive scale, but it could not force the improvement of productivity or efficiency.

The measurement of economic progress

For much of the interwar period, the aggregate output of the Soviet economy increased only with the size of the work force (or not at all). But this was not the story told by the government statistics. The official measures of production and of the population systematically overstated the expansion of the economy in all its dimensions, and this was used to validate the party’s policies. But such reports were highly misleading. There were several sources of bias, which were well understood at the time. When expert statisticians proposed to correct them, however, their efforts were consistently blocked by Stalin and Molotov.

Militarisation: a war economy in peacetime

In the 1930s the Soviet economy entered a permanent state of mobilisation, with a centralised command structure deploying millions of workers like an army. The Bolsheviks saw a mobilised economy as desirable in peacetime, not just in the exceptional circumstances of total war. How well did this work? Our narrative suggests that militarised administration was more effective in industry and transport than in agriculture. Industrial conditions of the time, such as mass production, were conducive to centralised coordination. Evidence of this can be found in 1937: when the officials supervising industry were decimated by purges, production sagged. In agriculture, too, the annual cycle was also centrally dictated. In 1937, the agricultural officials were decimated, as in industry—but with no identifiable effect on the harvest, which established an interwar record. What was damaged in 1937 was the state’s capacity to take the harvest for itself; the size of the harvest was not affected.

The emergence of the Soviet Union as a world power

The Soviet command economy was militarised in form. Was it also militarised in substance? Our answer is yes. We take Germany as the standard of comparison. In 1939, Germany was embarking on a war that Hitler viewed as the opening of a decades-long struggle for world domination. In that year the Soviet economy equalled Germany in most branches of war production. The Soviet Union alone produced almost a quarter of the world’s combat aircraft. Military power was more important for the Soviet leaders than economic analysis has tended to allow.

The reformability of the Soviet economy

The supply-chain problem of an economy built on these foundations was that the state became a monopolist intermediary of everything. The centre’s sweeping powers of allocation induced perverse incentives and inefficiencies everywhere below the apex. As soon as this economy came into being, those within it became aware of its defects and began to press for decentralising reforms. The secret record shows, however, that all such proposals were consistently rejected by Stalin and Molotov. Whether or not the Soviet economy was reformable in principle, it was not reformable in the 1930s.

The nature of Soviet economic development

Economic development involves more than just economic growth. One extra ingredient is structural change—for example, industrialisation. Another is the widening of human agency.

Industrialisation was one aspect of far-reaching structural changes in the Soviet economy. These structural changes created winners and losers on a massive scale. The winners included millions of young women who were drawn into education and training, which allowed them to escape from menial or servile positions, to enter factory and office work, and to pursue careers. The losers were the millions whose lives or loved ones were taken from them by famine or repression, including (of course) many young women.

There was also a widening of agency. With one hand the Soviet system freed young women from illiteracy and drudgery to play respectable roles in Soviet society. But with its other hand the same system monopolised governance and repressed entrepreneurship, restricting the agency of millions, including of many of the same young women. It used increasing compulsion to control their conditions of work, and detained increased numbers of forced labourers behind barbed wire.

It is easy to suppose that the creation of winners and losers was purposeful—that the point of Stalin’s policies was to raise some groups and cast others down. Our story shows that this was not the case. The promotion of some and the repression of others was usually improvised in the pursuit of another, greater goal. The greater goal was, first and foremost, to build the military and industrial power of the Soviet state, making it secure and imposing at home and in the world.

The party leaders pursued this greater goal at all costs, and with many miscalculations. Using their goal as the standard of success, however, our narrative shows that Stalin’s policies up to 1939 were broadly successful. Under them, the economy provided enough of the means of national power to secure the Soviet regime at home; and abroad, to survive and win the coming war with Germany; and to go on thereafter to compete for global influence in the Cold War.

Mark Harrison is Professor of Economics at the University of Warwick, UK, a Research Associate of Warwick’s ESRC Centre on Competitive Advantage in the Global Economy, and a Senior Research Fellow of the Centre for European, Russian, Eurasian Studies, University of Birmingham.